Arkansas Best posts 2Q loss of $7.4 million; conditions improving

Numbers are finally moving in the right direction for Fort Smith-Arkansas Best Corp., even though it posted a net income loss of $7.4 million for the second quarter of 2010.

The second quarter earnings reflected a net loss of 30 cents per share, which beat the consensus of analyst estimates by 9 cents. Also, total revenue during the quarter was $411.3 million, up 13.4% compared to the same quarter of 2009.

ABF Freight System, a less-than-truckload carrier and Arkansas Best’s largest subsidiary, saw second-quarter tonnage increase 14% compared to the first quarter. ABF has struggled through a “freight recession” that began in late 2006. The operating loss declined from $26.8 million in the second quarter of 2009 to $12.6 million in the second quarter of 2010.

“An improvement in daily tonnage levels at ABF was the major reason our second quarter loss narrowed compared to last year,” Judy R. McReynolds, Arkansas Best president and CEO, said in the earnings statement issued early Wednesday (July 21) morning. “We have been encouraged by the modest, but positive, pricing trend during the quarter and the fact that our customers continue to benefit from the traditional level of superior service for which ABF is known. However, overall freight levels and yields need to continue to improve in order for ABF to return to consistent profitability.”

Part of the return to profitability once included a tentative wage agreement with the about 7,000 union drivers (Teamsters) who work for ABF. The plan would have cut wages by 15% — similar to cuts afforded other trucking companies — and provided provisions to restore the wage cuts when ABF financials improved. However, the Teamsters rejected the deal in a late April vote.

The company did cut non-union pay and benefits, resulting in potential annual savings of up to $18 million.

Also, the company was able to reverse a trend by boosting its unrestricted cash and short-term investments to $143.9 million. Those funds, which have helped the company survive the lengthy and deep downturn in the national economy, were at $123.1 million as of March 31 and $133.2 million as of Dec. 31.

McReynolds said “recent competitor commentary” indicates the industry may soon return to improved pricing and better operating margins, potentially meaning that the period may soon end when other trucking companies will carry freight at a loss just to have the business. Despite improvements in freight demand, McReynolds remains cautious.

“We have been encouraged by the improved economy so far this year and its resulting positive impact on our business. However, the economy remains fragile and we are therefore prepared for a modest rate of recovery,” McReynolds said in the statement.

Arkansas Best, which employs about 9,500 nationwide, posted a 2009 net income loss of $127.52 million, compared to a $29.168 million gain in 2008. However, the 2009 income loss includes a non-cash accounting charge of $64 million for the impairment of goodwill. Total revenue in 2009 was $1.472 billion, a 19.6% dip from 2008 revenue of $1.833 billion.

ABF shares (NASDAQ: ABFS) were set to open Wednesday at $21.39. During the past 52 weeks the share price has ranged from a $34.56 high to a $18.84 low.